Proxy: Overview, definition, and example
What is a proxy?
A proxy is a legal authorization that allows one person or entity to act on behalf of another in making decisions, typically in corporate or shareholder matters. A proxy is often used to delegate voting rights in board meetings, shareholder meetings, or other governance decisions when the original party cannot attend.
For example, a shareholder who cannot attend a company's annual meeting may appoint a proxy to vote on their behalf based on their instructions.
Why is a proxy important?
A proxy is important because it ensures that decisions can still be made even if key individuals cannot be physically present. It allows businesses and shareholders to maintain continuity in decision-making while ensuring representation in critical matters.
For companies, proxies are essential for governance, enabling shareholders and directors to exercise their rights without being physically present at meetings.
Understanding proxy through an example
Imagine a company holds a shareholder vote on a merger, but one major investor is unavailable to attend the meeting. The investor appoints a proxy, giving another person or entity the authority to vote on their behalf according to their preferences.
In another scenario, a board of directors meeting requires a quorum to pass a resolution. A director unable to attend designates a proxy to participate in the meeting and cast votes, ensuring that the decision-making process is not delayed.
An example of a proxy clause
Here’s how a proxy clause might appear in a contract:
“Any shareholder may appoint a proxy to represent and vote on their behalf at any meeting, provided such appointment is made in writing and delivered to the Company prior to the meeting.”
Conclusion
A proxy allows individuals and businesses to delegate decision-making authority when they cannot be present, ensuring that governance and voting processes continue smoothly.By including a proxy clause in agreements, organizations can facilitate seamless decision-making, prevent disruptions, and ensure that stakeholders maintain their influence in key matters.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.